Tenet Healthcare Jumps 46% YTD & Trades Cheap: Should You Buy Now?

Tenet Healthcare Corporation THC has delivered a stellar 46% return year to date, outpacing both the broader hospital industry and the S&P 500 Index. Peers like HCA Healthcare, Inc. HCA and Universal Health Services, Inc. UHS have gained 34.6% and 1.2%, respectively, over this timeframe, highlighting THC’s clear leadership.Currently priced at $184.33, the THC stock trades just shy of its 52-week high of $185.25 — evidence of strong investor conviction. Adding to the bullish picture, Tenet Healthcare sits comfortably above its 50-day and 200-day moving averages, signaling strong upward momentum.YTD Price Performance – THC, HCA, UHS, Industry & S&P 500 Image Source: Zacks Investment ResearchThe stock is currently trading below Wall Street’s average price target of $197.65, implying a 7.2% upside from current levels.Decoding THC’s Growth ProspectsThe aging demographics and rising disease prevalence are set to fuel long-term demand for hospital services. Tenet Healthcare is well-positioned to benefit from this trend. Its USPI expansion efforts aim to help capture more market share in a highly fragmented healthcare market.Tenet’s strong second-quarter results prompted an upgraded 2025 outlook. It now expects 2025 adjusted admissions in the Hospital Segment to increase by 1.5%-2.5% from 2024 levels. Adjusted EBITDA is likely to remain between $4.4 billion and $4.54 billion for this year, well above the prior view of $3.975-$4.175 billion range. Adjusted EBITDA margins are expected to expand to 21–21.4% compared with the earlier expectations of 19.3–19.9%.Valuation AdvantageDespite impressive gains, THC remains attractively priced. Its forward 12-month price-to-earnings ratio of 11.58X is a discount to the industry average of 13.28X, earning it a Value Score of A. For context, HCA Healthcare trades at 14.74X and Universal Health Services at 8.51X, putting THC somewhere in the middle. Image Source: Zacks Investment ResearchTHC’s Strategic FocusBy second quarter-end, Tenet had stakes in 521 ambulatory surgery centers and 26 surgical hospitals. This growing outpatient footprint is expected to drive margins, free cash flow, and provide diversification benefits, giving resilience against regulatory shifts. The company is targeting $2.175–$2.375 billion in adjusted free cash flow for 2025.Investments in AI-enabled technologies are expected to enhance both clinical and administrative workflows, boosting overall efficiency. These moves will likely reduce costs, shorten patient wait times and significantly improve patient experiences.Moreover, THC does not shy away from divesting non-core and unprofitable business units to repay debt, maintain financial liquidity and make higher-return investments. Its divestments include five Alabama hospitals and three South Carolina hospitals, last year alone.Its net debt to capital of 56.6% is significantly lower than the industry average of 91.3%. Tenet exited the second quarter with cash and cash equivalents of $2.6 billion, which can easily cover its current portion of long-term debt of $84 million.Estimate Revision Favoring THC StockReflecting the positive sentiment around Tenet, the Zacks Consensus Estimate for earnings per share has seen multiple upward revisions. The consensus estimate for 2025 adjusted earnings for THC is currently pegged at $15.54 per share, indicating a 30.8% year-over-year surge. The consensus mark for 2025 suggests a further 2.7% jump. It beat earnings estimates in each of the past four quarters, with an average surprise of 31.2%. The consensus estimate for 2025 and 2026 revenues suggests 2.4% and 4.7% year-over-year growth, respectively.Tenet Healthcare Corporation Price, Consensus and EPS Surprise Tenet Healthcare Corporation price-consensus-eps-surprise-chart | Tenet Healthcare Corporation QuoteBottom LineTenet Healthcare’s combination of strong price performance, upgraded guidance, margin expansion, and strategic investments paints a compelling picture for investors. Its attractive valuation relative to peers, growing ambulatory footprint, and consistent earnings surprises further strengthen the investment case.With favorable industry tailwinds and management’s focus on efficiency and strategic growth, Tenet is positioned to sustain its momentum into 2025 and beyond. Backed by upward estimate revisions and robust fundamentals, THC currently carries a Zacks Rank #1 (Strong Buy), making it an appealing choice for investors seeking value and growth in the healthcare space. 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(UHS): Free Stock Analysis Report Tenet Healthcare Corporation (THC): Free Stock Analysis Report HCA Healthcare, Inc. (HCA): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks